The Impact of Industrial Policy Exit on Enterprise Investment and Production Efficiency
The 20th National Congress of the Party's report emphasized that"We must persist in promoting high-quality development as the main theme...accelerate the construction of a modern economic system,focus on improving overall factor productivity,and promote qualitative and effective enhancement and rational growth in quantity."In this process,attention should be paid to both industry upgrading and efficiency improvement,as well as enterprise efficiency enhancement,to increase the overall efficiency of resource allocation.This is closely related to the role of industrial policies.In the rapid development process since China's reform and opening-up,industrial policies have played a significant role in optimizing industrial structure and enhancing industrial competitiveness.However,during the implementation stage of industrial policies,the country may adjust policies based on economic conditions and gradually withdraw support for mature or overcapacity industries.This study primarily focuses on the impact of the national exit from industrial policies on the efficiency of enterprise production and investment,analyzing the conditions under which policy exit is more appropriate and the mechanisms through which it affects enterprises.The research findings indicate that,first,the exit of industrial policies can improve enterprise total factor productivity(TFP)and alleviate overinvestment.Second,in industries where significant leading enterprises have emerged and in regions with lower levels of marketization,the exit of industrial policies is more favorable for mitigating overinvestment issues among related enterprises.Third,the exit of industrial policies promotes enterprise TFP by alleviating overinvestment,improving the efficiency of utilizing R&D investment,and tightening external resources to alleviate overinvestment problems.Fourth,to some extent,the exit of industrial policies results in the"de-realization"of enterprise investments and indirectly increases enterprises'commitment to social responsibility.The positive effects of industrial policy exit should not be misunderstood as the ineffectiveness of industrial policies.The effectiveness of policy exit is based on the initial support,and the success of industrial policy support is evident when related enterprises maintain or increase innovation capabilities after policy withdrawal.The essence of industrial policy is to provide timely assistance rather than unnecessary embellishment.The introduction of industrial policies enables the development of nascent industries,and when these industries mature,relevant policies should be promptly withdrawn.On the one hand,gradually transitioning from policy regulation to market mechanisms can reduce overinvestment and enhance efficiency.On the other hand,withdrawing support policies from mature industries allows for utilizing related supporting policies to assist new strategic emerging industries,embodying the cyclical nature of industrial policies.The study has rich policy implications.First,the implementation of government industrial policies should be decisive,avoiding continued support for mature industries in a"adding flowers to brocade"manner.Permanent industrial policies should be avoided,and when industries mature and competitive leading enterprises emerge,timely withdrawal is appropriate.Second,as the exit of industrial policies may lead to the de-realization of enterprise investments,the government should regulate investments in virtual assets,guard against systemic risks,and actively foster market intermediaries to guide financially affluent enterprises to invest in the real economy.Third,the effectiveness of industrial policies requires local governments to adapt to local conditions.In regions with well-established market intermediaries,a sound legal environment,and fully developed factor markets,local governments are more likely to achieve significant results with their industrial policies.If local governments enact industrial policies without considering the local institutional environment and blindly rely on government funds to drive industrial development,it may lead to serious overinvestment problems.Therefore,the government should highly prioritize nurturing regional market environments,improving fair competition and legal environments,and implementing competitive industrial policies with effective institutional safeguards while timely withdrawing them.
Industrial Policy WithdrawalTotal Factor ProductivityOverinvestmentStaggered DID